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8 April ECB Governing Council

FOLLOWING an in-depth review of recent monetary, financial and economic developments, the European Central Bank’s 17-member governing council decided to cut its key interest rates. The main refinancing rate was cut 0.5 of a percentage point to 2.50%, the marginal lending facility by one point to 3.5% and the deposit rate by 0.5 of a point to 1.5%.

European Voice

4/14/99, 5:00 PM CET

Updated 4/12/14, 4:32 AM CET

IN A statement, the bank gave its reasons for lowering interest rates. Chief among these was the slowdown in the annual rate of growth of the M3 ‘broad’ monetary aggregate, which measures banknotes and coins in circulation and easily-cashed deposits and debt instruments. In the year to February, euro-zone M3 slowed to 5.2% from 5.6% in January. Although this remained above the ECB’s 4.5% ‘reference value’ for setting monetary policy, the council concluded that much of this was due to an unusually high inflow to overnight deposits at the inception of monetary union. Secondly, they found that the annual rate of increase of the euro zone’s harmonised index of consumer prices (HICP) had been just 0.8% for several months and showed few signs of inflation. “The interest rate decision has been taken in a forward-looking perspective, focusing on the medium-term trends in inflation and the compatibility of these trends with the Eurosystem’s definition of price stability,” said the bank.

COUNCIL members agreed that they had gone as far as they could in lowering interest rates to stimulate growth and employment. “Those responsible for other policy areas are urged now, even more, to take the necessary steps to improve longer-term growth prospects for the euro area through strictly and decisively adhering to the aims of the stability and growth pact and through convincing structural reforms in the economy,” said the post-meeting statement.

ECB President Wim Duisenberg made his position clear regarding the level of the euro on the international markets. At his press conference after the meeting, Duisenberg pointed out that the euro – and the ‘synthetic’ euro calculated by analysing the performance of its constituent currencies – had been stable between $1.08 and $1.10 over the past two years. “In the middle of September, it started to rise to reach a level of $1.16 at the end of the year, and that was the level at which we entered the euro area,” he said. Since then, it has declined to $1.08. “So we have no reason to be dissatisfied with that level. It is around the level at which the euro has stood for more than a year,” he said.

THE council examined the results of a production test run for euro banknotes, involving the printing works of all the participating countries. This was carried out to check the compliance of the test banknotes against technical specifications and to prove that the assigned printing works were in a position to produce notes to the required standards. Following the test, a few minor technical changes will be made. The ECB also decided to set up an analysis centre for counterfeit notes, which will be based at the bank’s headquarters in Frankfurt.